The Taxman Cometh
It's tax time. Actually, the first of April is right in the middle of the corporate and personal tax filing dates. Sorry to remind you, but I wanted to give you some food for thought as you reflect on the money you send to the various governmental agencies during the year.If you own a business you know all about taxes. If you are planning to become a small business owner, you will learn that a significant amount of your business resources will be focused on tax paying, collecting, and compliance issues.
Just for fun, I have listed SOME of taxes you will have to deal with, one way or another, in your business:
• Personal income TAX
• Self-employment TAX
• Capital Gains TAX
• Corporate income TAX
• Payroll withholding TAX
• Social security TAX
• Ad Valorem TAX
• Franchise TAX
• Estate TAX
• Alternative minimum TAX
• Lease/Rental TAX
• Use TAX
• Asset TAX
• Sales TAX
• Gas TAX
• Lodging TAX
• Tele-communications TAX
• Cable TAX
• Excise TAX
•
•
Did I miss any? Probably. I left a couple of spaces so you can fill in the blank. Is there anything that the government can't find a way to tax? Jonathan Swift, best known as author of Gulliver's Travels, upon hearing a lady remark how good the air was in Ireland, fell to his knees and exclaimed, "For God's sake, madam, don't say that in England, for if you do, they will surely tax it."
Insult To Injury
Businesses not only have to pay our portion of taxes, but we also have to collect most of the taxes that are due from others, like employees and customers. There will be times when it seems that half of your time is consumed with making sure that you pay or collect, and then remit the right amount of taxes.
The other half, it seems, is spent planning how to avoid (not evade) paying more taxes than the law requires. In a 1934 United States Court Of Appeals decision, Judge Learned Hand wrote, "Any one may so arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose the pattern which will best pay the Treasury." That's comforting news, but sadly, His Honor's words only apply to income tax. Alas, most of the taxes we pay have no avoidance opportunity. You do the math, and you send it in.
Where Did We Go Wrong?
In my opinion, over the past 60-70 years Americans have turned over too much responsibility, authority, and power to politicians. Government consumes lots of income, but (other than tariffs and the sale of assets) doesn't actually produce any. The more programs we demand or allow our representatives to create, the more of our money they need. The fuel the political machine runs on is tax dollars from you and me. And it's an insidious process:
We demand more from our government - politicians agree to assume that role - they tell us what our wishes will cost - they send us the bill - we pay. And when Murphy developed his famous law, in the part that says, "...it always costs more than you think", he was speaking about government. (OK, I don't actually know that, but it could have happened.)
Budgets And P&Ls
In business you develop budgets to plan the financial activity of your company. But a business budget is just a tool; the numbers on your budget, like monopoly money, aren't real dollars you can spend. Your numbers become real only when you operate your business by taking in sales receipts from customers and disbursing expenses to vendors. Then they show up on your financial statements, and that's when they become real!
In government, there are no financial statements, only budgets. For government, the numbers on a budget are very real. And they do, in fact, represent dollars government can spend.
When you and I need more money in business, we either earn it or borrow it. Both actions require some degree of success and productivity. When government needs more money it simply increases taxes to be paid and collected by you and me, irrespective of the relative success of government or its programs. In fact, much of the tax dollars we are now paying go to bail out the government's many past failures.
Oh, yeah, when the money we send government isn't enough, they can borrow, too. And incredibly, they then send us the interest ticket. You can't do that. You wouldn't let anyone else do it to you. When did that kind of behavior become OK for our government to do that? As I said, it started about 65 years ago.
A Call To Arms
If it sounds like I am trying to get you riled up about paying taxes, you are right. But I am only trying to incite you to be riled, not to riot. What better time to raise your consciousness, and ire, than when you are writing the most checks to the taxman.
What's The Solution? Here are four of my thoughts:
1. We need to take more responsibility for our own actions. America will go nowhere fast as long as we assume an entitlement attitude. Next time you feel the need to say, "the government should do something about this?", before you make that exclamation, remember that solutions cost money. Ask yourself, "who's going to pay for this?" Then determine who can solve the problem more successfully and more efficiently, you and me, or the government; all the while reminding yourself of Murphy's Law.
2. Let's support the movement to make any new tax, or any new tax increase, require a two-thirds majority in both houses before passage.
3. Support lower taxes instead of reduction of the national debt. Lower taxes keep dollars out of politicians' hands and in the marketplace. There is ample evidence that the last capital gains tax reduction created significant new tax revenue for politicians to spend. That's how the debt will be reduced: through productivity, not taxation. FED Chairman Alan Greenspan testified before Congress that debt reduction would be the best plan for the surplus, IF the surplus could not be kept out of Washington through tax reduction. The Chairman knows politicians.
4. We need to insist that our governments: local, state, and federal, be run more efficiently - more like you have to run your business. The only way to make this happen is if we all take an interest in what is going on in our local governments, state capitals, and in Washington, DC., and tell our politicians what we expect. With technology, especially the Internet and email, there has never been an easier time to accomplish this.
Write this on a rock... To be sure, there are many things the government does well, and deserves the budget to conduct. But let's not give them the mandate or the budget to conduct one thing extra. And whatever you do, don't mention the air.
